September 21, 2020

DealBook: Minmetals Resources Bids $6.5 Billion for Equinox Minerals

9:04 p.m. | Updated

OTTAWA — A unit of a Chinese state-owned mining company said on Sunday that it had made an unsolicited $6.5 billion takeover bid for Equinox Minerals, a copper mining company based in Toronto.

The bid by Minmetals Resources, which is controlled by China Minmetals, is the latest effort by China to buy control of major resources required by its growing industries.

That strategy has been controversial at times, particularly in Canada. In 2004, China Minmetals tried to acquire Noranda, Canada’s largest mining company at the time, but withdrew the bid after it became a contentious political issue in Canada.

Another Chinese company, Sinochem, check both weighed a takeover offer for the Potash Corporation of Saskatchewan last year, but decided against bidding because of political opposition.

Martin McFarlane, the head of investor relations for Minmetals Resources, said on a conference call Sunday that the Canadian government is unlikely to block this transaction because Equinox’s mines are in Zambia and Saudi Arabia and the company has relatively few Canadian employees.

“We’re not expecting any particular issues,” Mr. McFarlane said.

The transaction must also be approved by the government of Australia, where Equinox also has a stock listing.

Under the terms of the offer, Minmetals Resources would pay 7 Canadian dollars a share, a 23 percent premium over Equinox’s Friday closing price.

The timing of Minmetals Resources’ bid was set in part to stymie Equinox’s own unsolicited bid for another Canadian mining firm, Lundin Mining. Lundin has urged its shareholders to reject Equinox’s cash-and-stock offer, initially valued at about 4.8 billion Canadian dollars.

During the call, Minmetals Resources’ chief executive, Andrew Michelmore, repeatedly emphasized that the company is financing the deal with cash from its parent and other Chinese companies. By contrast, he said, Equinox’s bid for Lundin will be supported by $3.2 billion in debt.

The Minmetals Resources bid, he added, would provide Equinox shareholders with certainty rather than what he called “a highly leveraged and relatively higher risk opportunity.”

In a statement, Equinox acknowledged the bid and said its board would meet to consider it.

Mr. Michelmore said the deal would allow Minmetals Resources to transform from being primarily a zinc producer to being a copper mining firm. Equinox looks attractive because its projects are either already operational or are about to become so, he said.

Equinox produced 146,690 tons of copper in 2010, generating about 1 billion Canadian dollars in revenue.

Minmetals is being advised by Deutsche Bank, Macquarie Capital and the law firms David Ward Phillips Vineberg, Freehills and Linklaters.

Michael J. de la Merced contributed reporting from New York.

Article source: http://dealbook.nytimes.com/2011/04/03/chinas-minmetals-bids-6-5-billion-for-equinox-minerals/?partner=rss&emc=rss

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